LEARN BOLLINGER BANDS %B IN 3 MINUTES – BLOCKCHAIN 101

In the previous class, we learned the technical indicator for identifying market overbought and oversold phenomena: WILLIAMS% R. However, the market is unpredictable, and traders often combine other technical analysis tools and trend confirmation to make more comprehensive decisions when using this indicator.

This lesson is to once again introduce another technical indicator for identifying overbought and oversold in the market: Bollinger Bands% B, which facilitates traders to comprehensively consider and make more accurate decisions.

Introduction to Bollinger Bands% B

Bollinger Bands% B was introduced slightly later than WILLIAMS% R. It was proposed by technical analyst John Bollinger in 1980 and is a derivative of the Bollinger Bands indicator. The Bollinger Bands were originally designed to measure the volatility of prices relative to a simple moving average. On this basis,% B is obtained by normalizing the relationship between the current price and the upper and lower tracks of the Bollinger Bands.

The emergence of %B is mainly to provide information about the market’s overbought and oversold status. It can help traders identify potential price reversal points, especially when prices deviate from the extreme levels of the Bollinger Bands. This makes% B one of the widely used indicators in technical analysis to assist decision-making and risk management.

The Bollinger Bands are composed of three lines: the middle rail (simple moving average), the upper rail (standard deviation multiplied by a coefficient plus the middle rail), and the lower rail (standard deviation multiplied by a coefficient minus the middle rail) The calculation of B involves the relationship between the current price and the upper and lower tracks of the Bollinger Bands.

calculation formula

\%B = \frac{{\text{{Close Price}} – \text{{Lower Band}}}}{{\text{{Upper Band}} – \text{{Lower Band}}}

Among them:

• Close Price is the current closing price;
• Lower Band is the lower track of the Bollinger Belt;
• The Upper Band is the upper track of the Bollinger Band

Of course, for the calculation formula, everyone needs to have a certain understanding, and there is no need to delve deeper. SuperEx provides all trading users with fully configured Bollinger Bands% B to draw curve graphs, making it convenient for everyone to visually observe the calculation results of Bollinger Bands% B.

The way Bollinger Bands% B is judged

%The value of B is usually between 0 and 1, and it can provide the following information:

• When% B is greater than 1, it indicates that the price has exceeded the upper limit of the Bollinger Band, which may indicate that the market is in an overbought state;
• When% B is less than 0, it indicates that the price is lower than the lower bound of the Bollinger Bands, which may indicate that the market is in an oversold state;
• When% B approaches 0.5, it indicates that the price is close to the middle track of the Bollinger Bands, which may indicate a relatively balanced market.

By observing the value of% B, traders can better understand the current market trend and potential price reversal points, which helps in formulating trading strategies.

conclusion

%B is widely used by traders in various markets, including stocks, futures, and cryptocurrency markets. Its calculations are simple and intuitive, providing traders with a tool to observe market sentiments and trends. However, caution is still needed when using% B, and it is best to combine other indicators and analytical methods to obtain a more comprehensive and accurate market picture.